Save Our Savers Newsletter – 26th January 2011

Save Our Savers – One Year On

Save Our Savers was launched a year ago on the 26th January 2010. It has been an eventful twelve months and we would like to thank all of you who have joined us along the way for your contributions and support.

Receiving our newsletter is one of the main ways of showing support for the campaign. The more people we can say support us the more seriously we will be taken by politicians, policy makers and the media so please carry on receiving it and encourage other savers to sign up as well.

I would like to take the opportunity for a quick recap and a look forward to see what this next year has in store.

Why we started Save Our Savers

We started SOS in the knowledge that successive governments had always supported borrowers at the expense of savers and with the strong belief that saving provided the route out of the economic quagmire the country had landed itself in.

We had just seen consumer debt rise to record highs, easy credit had perpetuated a buy now pay later culture. The housing market had spiralled out of control fuelled by and in turn fuelling a culture of debt that was further aggravated by the abuse of self-certified mortgages which became known as “liar loans”.

The curtailing of tax incentives, poor regulation and significant falls in the stock market had lead to the failure of numerous occupational pension funds. Retirees in money purchase schemes found that their investments fell far short of what they had been lead to expect. Stories of people who were forecast pensions of £20-25,000 a year on the back of a growing market who later only received about £5,000 are common.

Then in Sept 2008 the banking crisis struck. Billions of pounds of tax payers money was used to prop up the banking system.

The loans to banks were converted into shares, at the expense of the current shareholders which included many pension funds and private investors. This way the banks themselves wouldn’t have to pay back the loans. That would be done by selling the shares back to the market in the hope that the Government will then have made a profit for the tax payer. If this hadn’t happened the customers would have ended up paying for the loans through lower saving rates and higher charges.

As it turned out the customers ended up paying the price anyway. Savings rates fell to all time lows and lending rates increased to more than they were before the crash. The only winners were those on tracker mortgages – that was, if despite the recession, they still had jobs.

Savers had been used, abused and were paying the price for other peoples profligacy.

There are tens of millions of savers in the UK and they certainly far outstrip borrowers in numbers if not importance in the minds of politicians.  As far as we knew there had never been an attempt at putting together an organisation to unite savers and it was time for savers to be given a voice.

The response to Save Our Savers

When we launched we had no idea what the nature or size of the response would be. It soon became clear that while many savers understood how they had been penalised the majority either didn’t or felt there was nothing they could do about it. We realised that if we wanted to mobilise the saver as a major force our first job was to stimulate discussion and create a mass awareness of the issues. So that is what we have set out to do and over the past year we have created:

• A focal point for savers
• A media profile that enables us to get our views published
• A membership of 2,700 registered supporters – but the number of regular visitors to the web site indicates a far greater interest.

A brief look back at 2010

During the year the Coalition Government has taken office and launched numerous consultations and reviews covering all manner of savings related issues. But if any of us had hoped that the new Coalition Government would act to support savers we were soon to learn otherwise.

One of the first announcements was the closure of Child Trust Funds. This was followed by the cancellation of the Savings Gateway (a scheme to help the some of the poorest in society start to save). And an enormous reduction in the annual tax allowable pension contribution from £255,000 a year to £50,000 with effect from 2011. Record low interest rates and a fear of inflation caused an enormous rise in demand for the NS&I indexed linked savings certificates. These were very quickly withdrawn.

Charlie Bean, the Deputy Governor of the Bank of England, announced that the specific intent of the Banks’ monetary policy was to discourage saving a message that no member of the Government attempted to contradict. Meanwhile banks kept interest rates paid to savers at record lows and the rates available to borrowers increased to more than before the crash.

On a brighter note the European Union passed legislation that required deposit protection to rise from £50,000 to £85,000.

What’s in store for 2011

Inflation looks set to be the main issue that affects all savers in 2011.  The main thrust of our campaign will be for the Government to use its borrowing power to provide indexed linked savings products that pay inflation plus a rate. These would enable savers to protect the value of their savings at the same time putting money directly back into the economy, reducing the UK’s reliance on foreign lenders and furthermore it will be rewarding financial responsibility.

We can expect to see new financial products as the Government is currently consulting on plans to introduce early access to pension savings and also on how to develop a new range of “Simple financial products” of which deposit accounts will be one of the first to launch.

The financial regulatory landscape is changing. The new Consumer Protection and Markets Authority (CPMA) will take over responsibility for regulating the conduct of firms providing financial services to consumers from the Financial Services Authority (FSA). The recently formed Consumer Financial Education Body (CFEB) will be stepping up its efforts to provide free and impartial financial advice, including an annual financial health check for us all. And more power is being given to the Bank of England, who through the Financial Stability Committee will have responsibility for overseeing banks, insurers and building societies to ensure the stability of the UKs financial system.

After recent events it would seem obvious that one way of improving financial stability in the UK would be to promote saving but despite the creation of these three new bodies there is still nobody with the responsibility for doing this.

The Independent Commission on Banking is set to issue an interim report in April and its final recommendations in September 2011. This is likely to have wide ranging implications on the savings market as they will be recommending changes to increase competition amongst banks and also to promote financial stability. In essence this means separating investment and retail banking and removing retail deposits as a cheap source of funds for investment bankers. The big question is what form this separation will take.

What is a saver to do?

On a practical note many savers are taking action to cope with the current low rates.  Some have been forced to move into higher risk investments and we are very grateful to John Kay a leading economist and expert investor for providing us with an insight into structured investment products which are being increasingly widely offered to savers. Others may be considering turning to the one major asset they have left, their home. Equity release has been controversial, expensive and received a lot of bad press; but the industry and regulators are slowly getting their acts together. The truth is that with pitiful returns on pension annuities and savings more and more people will need to give serious consideration to it. Pam Atherton brings us up to date with an article explaining some of the latest news and issues.

If you have any comments you would like to make about the campaign or the site please reply to this newsletter we would be very pleased to hear from you.